Merrill Lynch: Emerging Market Infrastructure Spending Will Surge 80% in the Next 3 Years
Jul 9th, 2008 | By Jason Simpkins | Category: Emerging Markets“These investments are inspired by the Kingdom’s ambitious strategy to tackle the country’s most chronic social and economic challenges; rising unemployment and the need to create more than five million new jobs by the year 2020, declining living standards and overall wealth of the population, and the unbalanced regional economic development,” the NCB told Emirates Business.
In fact, as Emirates Business reported, Saudi Arabia has opted to curb steel exports to its Gulf neighbors after soaring demand resulted in shortages that left the nation unable to complete its own slate of massive building projects.
Meanwhile, Dubai is funneling $82 billion into an aerospace project that includes plans for the world’s largest airport. And that’s just part of the $300 billion in construction-and-development projects currently underway in Dubai.
Some other gargantuan infrastructure projects in the region include:
- King Abdullah Economic City, Saudi Arabia: $120 billion. The leading firm is Dubai-based developer Emaar.
- Silk City Project, Kuwait: $86 billion. The leading firm is Tamdeen Real Estate.
- Dubailand, U.A.E.: $60 billion. The leading firm is Tatweer.
- Al-Zorah, a $60 billion coastal city in the emirate of Ajman. The leading firm is Solidere International.
All of this money will eventually trickle down to the purveyors of raw material used in construction. That puts Rio Tinto PLC (RTP), BHP Billiton Ltd. (BHP) in an enviable position.
Both companies have secured a 97% increase in price they will be paid for their iron ore. Nippon Steel Corp., the world’s second-biggest steelmaker, recently accepted a record increase in iron ore prices from BHP that matched a doubling of prices Rio Tinto and Baosteel agreed to last month.
Their proximity to Asian markets also makes BHP and Rio a strong play for the burgeoning Chinese market. China – which is both the world’s largest producer and consumer of steel – imported 383 million metric tons of iron ore in 2007, an increase of 56.8 million tons, or 17.4%, from the previous year, according to the China Iron and Steel Association.
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